Contracts Outline 2021
I. Formation of contracts
(A) Theories of Promissory Liability (Pgs. 8-10) Contract as promise - thesis holds that law is
justified in enforcing a promise when an individual intentionally invokes a convention whose
function is to give grounds - moral grounds - for another to expect the promised performance.
(1) Consent theory - grounds for enforcement less in a general moral duty to keep
promises than in consensual undertakings that reveal an intention to create a legally
enforceable obligation.
(2) Both theories look to the promisor's will in making a promise or voluntarily taking on
a legal duty in locating the basis for judicial enforcement.
(3) Reliance Theory - (Current Model)When a promisee reasonably relies on a promise to
his detriment, law may, and in many cases does, enforce the promise, even against the
promisor's will, in order to protect the promisee.
(a) Specific item - an item where the merchant relied on the contract for the item
to be produced. The item is unique in nature, such as a team logo on the shirt and
cannot be sold to another person other than those requesting the item since it
contains a unique aspect. Even if the contract falls under the statute of frauds, it is
still enforceable because the item cannot be sold to the general public.
(B) Mutual Assent - (Black's Law Dictionary) Defining Mutual Assent - §13 In order to form a
valid contract, there must be a manifestation of mutual assent.1 A contract is not created unless
the parties communicate to one another a distinct and common intention to create a binding
obligation.2 Parties to a contract must intend for there to be a contract3 and must have a distinct
and common intention that is communicated by each party to the other.4 Mutual consent is
essential to every agreement, and as a rule, there can be no binding contract where there is no
real consent.5
Manifestation of mutual assent requires that each party make a promise or begin to render
performance; the manifestation of assent may be made wholly or partly by written or spoken
words, or by other acts or the failure to act.6 This requires objective manifestations of intent to
contract.7
Manifested mutual assent rather than actual assent is the essential element in the formation of
contracts.8 Because the "mutual assent" inquiry examines the parties' outward, objective
manifestations of intent to a contract, expressions of assent are generally sufficient to form a
contract.9 The manifestation of mutual assent requires that each party make a promise or begin
or render performance,10 and may be made wholly or partly by written or spoken words, or by
other acts or the failure to act.11 Because manifested mutual assent rather than actual mental
assent is the essential element in the formation of contracts, one party's mistaken idea as to
whether acceptance of an offer has occurred cannot overcome the recognition of mutual assent
based on conduct.
(C) Theories of Promissory Liability - (Pg. 8-10)
(D) Ratified contract - Goods were paid for or good have been received. Also, a contract can be
ratified even if it falls under the statute of frauds. Ex. The common age of adulthood in Alabama
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is 19. If an 18 year old buys a car under contract, the contract is void under the SoF due to the
child not being able to enter into a contractual agreement under OACLLES. However, if the
child keeps the car past their 19th birthday, the contract is ratified as if it were signed by a person
of legal age at the time of purchase. Before the 19th birthday, the child could return the car and
the contract can be voided by court.
(1) Contract Elements (Class Notes)
A. All contracts are controlled by Common Law of contracts and the Uniform
Commercial Code. If the Common Law has a rule, that rule prevails.
B. Services, Intangables and Real Property are under common law.
C. UCC Article 2 deals with the sale of goods.
D. If the UCC does not cover an aspect in the sale of goods, then the common law is used
to determine the contract elements and enforcement.
(2) Defining a "good" under UCC Article 2 (class notes) - All things movable at the time of
identification to the contract for sale. Goods also include the unborn young of animals and crops
as well as things that can be severed from the property (selling timber off the land). The category
of the good is determined by the intent of the bargain. e.g. A silver dollar as money is worth one
dollar, but as a collectible it can be any price. "Anything you can pick up and take with you."
(Prof. Stanley)
(3) OACLLES - acrostic for necessary elements of a contract. (1) O - Offer (2) A - Acceptance
(3) C - Consideration (4) L - Legally able to enter a contract (invalid if the person entering the
contract is underage, intoxicated, or mentally insane) (5) L - No legal issues to prevent the
contract from being formed (If, for example, you wanted to contract the sell of cocaine, since
that is an illegal substance to sell, the contract would not be valid) (6) S - Statue of Fraud (see
SoF below)
(4) Offer - Willing to bind oneself to another for an exchange of a good (UCC) or services,
intangibles or real property (CL) (Prof. Stanley) See UCC §2-205
(A) Advertisements – generally, advertisements are an invitation to make an offer.
(B) UCC - For listing of UCC, see end of Outline.
(C) Illusory offer - Not a true offer but illudes to the possibility of an offer. Ex. "I might
sell you my truck." Since it is not a true offer, there is no contract. (class notes)
(D) Counter offer - Rejection of the initial offer. For further see Counteroffer under
section 2 under Condition Precedent.
(5) Firm Offer - Also known as Merchants Firm Offer because it only applies to merchants who
enter into contracts with each other. in certain cases, enables an offeree to enforce an offer
which, by its terms, states that it will be held open, even though the promise to hold it open was
not supported by consideration. Firm offers apply to merchants only. (Stanley - § 2-205. An offer
by a merchant to buy or sell goods in a signed writing which by its terms give assurance that it
will beheld open is not revocable, for lack of consideration, during the time stated or if no time is
stated for a reasonable time, but in no event may such period of irrevocability exceed three
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months; but any such term of assurance on a form supplied by the offeree must be separately
signed by the offeror.)
(6) Mistakes - in general, there are 2 types of mistakes. (pg. 1021) When a party's performance is
impeded, or when a party's expectations are seriously thwarted by circumstances existing but
unknown to the parties at the time they enter into the contract, a common ground for claiming an
excuse is a mistake.
(A) Unilateral mistake - not in accordance with the truth. you buy a house, but the
address is wrong and you didn't check it before signing the contract. You are still liable to
complete the contract even though there is a mistake. If fraud can be proved, you could
recover triple damages. The general rule is that a unilateral mistake of one party is not
grounds for void-ability. The remedy is to make the party indifferent to the breach. buyer
bears the risk of unilateral mistakes, however, if the other person has some knowledge
also known as constructive knowledge, or if they aided in the mistake such as a failure to
disclose a defect, then the contract may be void.
(B) Mutual mistakes - Both parties are mistaken. if the mistake is minor and not relevant,
the contract stands. (Pg. 1022) Where both parties to the contract are mistaken as to the
same basic assumption. Renner v. Kehl, pg. 1026
(C) Mutual mistake of value - Not usually grounds for recission. if something is
undervalued, it falls on the seller. Ex. I have my dad's old car in the barn under a tarp. I
have no idea what condition its in, but someone offers me 1000 sight unseen. I accept
because I assume its of no value. However, turns out there was a Bentley under there and
its worth over 100,000, that's really good news for the buyer.
(D) Mutual mistake of facts - No meeting of the minds, then grounds for voiding. I say I
will sell you my car and I am talking about my ford escape, but you think i mean my F150, then we never agreed. The parties disagree on which items were being discussed so
there was no mutual assent for purchase.
(E) Mixed value and fact - if the mistake is both value and fact, courts will base on fact
and make it voidable. Ex. I sell you land because we both think there is coal under it, but
it turns out there is no coal. This is both fact and value because you bought it based on a
disproven fact that significantly lowered the value.
(F) Act of God - (Pg. 1025) It is well established law that where one contracts to furnish
labor and materials, and construct a chattle, or build a house, on land of another, he will
not ordinarily be excused from performance of his contract by the destruction of the
chattel or building without his fault before the time fixed for the delivery of it. If you are
building a house for someone and a tornado blows away the work you have done, you
still have to build the house.
(1) Knowledge of Mistake – Elsinor Union elementary School District v. Kastorff. If an
offeree knows or has reason to know of the offeror’s material mistake at the time of
acceptance, the offeror is not bound. Also see, Tyra v. Cheney.
(2) If a contract is not voidable on its face, it may still be voidable due to mistakes. Any
mistake in the contract may make it voidable. There are triple damages for contractual
fraud. (class notes)
(7) Acceptance(et. al. to next section)
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(1) There are two ways to accept an offer; (1) Verbally, (2) By Performance.
Wuchepfenning v. Dooley – Why does “ready to proceed” not constitute an assent to the
terms?
Shipment of goods as acceptance – UCC §2-206 (1)(b) an order for prompt or current
shipment shall be construed as inviting acceptance either by a prompt promise to ship or
by the prompt or current shipment of conforming or non-conforming goods.
Non-conforming goods – goods that do not match the order. This could be the wrong
product entirely, or a different number of goods shipped than what was ordered. (see
Corinthian pharmaceutical v. Lederle) Book Definition – a situation where a shipment is
made following an order is shown by a notification of shipment to be referable to that
order but has a defect.
Preparation for shipment of goods as acceptance – What if a buyer attempts to revoke an
order after the seller has incurred expense in preparing to ship the goods but has not
actually shipped them? (Doll v. Dairy pg. 225.) This does not constitute damages.
Tracking orders will not suffice to show acceptance.
(2) Condition precedent - Something that must be performed before a contract can be fulfilled.
(class notes) See Also Restatement §224.
(A)Revocation - (class notes) a person can revoke an offer at any time before the
acceptance except for merchant's firm offer.
Caldwell v. E.F. Spears – Ordinarily, an offer made by one to another in a face to face
conversation is deemed to continue only to the close of their conversation, and cannot be
accepted thereafter.
(B) Counteroffer - An inquiry to sell at a lower price does not constitute a counteroffer. If
the buyer ascends to accept the original offer after inquiring about a lower price, the
original offer still stands. Also, a counteroffer is a rejection of the original offer.
(C) Shipment (UCC) - Goods purchased, “movable at the time of identification to the
contract for sale.” Does not apply to land or services, only goods.
(D) Silence - Does not constitute acceptance. Restatement section 69
- Carlill v. Carbolic Smoke Ball Co
Acceptance by performance. In this case, the plaintiff used the smoke ball which
purported to prevent one from catching influenza and that if used in the manner described and
yet one still contracted the virus, a sum of 100 English pounds would be given. They refused
stating she did not inform them of her participation but the defense was inadequate.
(II)Termination of the Power of Acceptance
(1) Termination of the Power of Acceptance – 1. lapse of the offer 2. by its revocation by the
offeror, 3. by the offeror’s death or incapacity, or 4. by the offeree’s rejection (pg. 228)
(a)Lapse of an offer – If no period is specified in the offer, it lapses after a reasonable
time. A reasonable time could be if the value of the good or service has changed over
time. Akers v. J.B. Sedberry – Akers offered to resign, the president ignored his offer but
called him a few days later and accepted. The court reasoned “‘Ordinarily, an offer made
by one to another in a face to face conversation is deemed to continue only to the close of
their conversation and cannot be accepted thereafter.’”
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(2) Revocation of Offers - Hoover Motor Co. v. Clements Paper Co. . After two months of not
accepting an offer, the plaintiff (hoover) sent an acceptance after a phone call. Clements
responded with "I dont know if we are ready" and the plaintiff sent a letter of acceptance after
the call. Court decided that the defendant had revoked the offer at that point. "The offeror is not
bound, in spite of the requirement that the revocation be actually communicated to the offeree."
(232)
(3) Limiting the Power of Revocation: Option Contracts - An option contract will express
directly or indirectly, a time limit for how long the offer stays open. Dickson v. Dodd. - Setting a
time limit on an offer does not bind the offeror from accepting another offer before the time has
expired since it is only an offer that is made and not a contract obligating one to sell to a single
offeree.
(A) Cannot revoke an option contract because money changed hands. (Class Notes)
(4) Firm Offers Under Article 2 - Irrevocable offers, used to be done with a "seal" but now falls
under the doctrine of consideration. Also known as "Merchant's Firm Offer" since they only
apply to merchants who enter into agreements.
(5) Mailbox Rule - Adams v. Lindsell. (249) an offer can not be revoked after the acceptance has
been postmarked. Common law has been to answer these questions of the assumption that
dispatch of the acceptance, not its receipt, is the moment of acceptance and, therefore, the
moment at which the contract was made.
- Restatement §§ 36, 41, 42, 43, 48
(III) Types of Contracts
(A)
(a) Unilateral contract - Contract where only one party makes a promise.
(b) Bilateral contract - Contract where both or all parties make a promise. (Pg. 94)
Restatement of Contracts §71
(c) Implied-in-fact contracts
(d) Integrated contract - a type of contract that can not use Parole evidence unless the
contracts says you can or there is ambiguity.
1. For unilateral and bilateral contracts, the relationships between the parties can
be analyzed in terms of right and duty. eg. A is said to have a right that B shall do
an act when, if B does not do the act, A can initiate legal proceedings against
B,and B in such a situation is said to have a duty to do the act.
(e) Output contract - a contract that calls on the seller to deliver and the buyer to take all
of the goods, or all of a certain sort, that may be produced by the seller. The seller has an
obligation to produce in good faith and can only sell to the contracted buyer. (pg. 110)
1. Precontractual Liability - If no contract has yet been formed but the parties have agreed to
begin work with the contract forthcoming and then the negotiations of the contract fail, the
aggrieved party may have a claim in restitution.
A. Restitution - If during the course of negotiations one party has conferred a benefit on
the other, the recipient may be required to restore the benefit, or its value. See Hoffman v.
Red Owl Stores.
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2. Express Agreements - Parties are willing to undertake the obligation of negotiating in good
faith may not do so by express agreement. Express Agreements are based in the promise of
performance.
(A) Good Faith - (pg. 594) In addition to limits imposed on the content of a bargain, the
law also insists on certain decencies in how the parites carry out thier contractual
obligations. These derive from the obligation developed in the common law that parties
must perform in good faith. The restatement asserts a Duty of good faith and fair dealing
in contract performance and enforcement. (See restatement §205). The UCC imposes a
similar obligation of good faith (See UCC §1-304)
3. Requirement of Definiteness - Is the agreement definite enough to be enforced? See UCC 2204 and Restatement §33. In deciding whether or not an agreement is sufficiently definite, a
court may piece together terms from such sources as preliminary negotiations, prior
communications, external sources such as governmental regulations and applicable trade
usages... Terms such as good faith and reasonable efforts are regarded as sufficiently definite if
their content can be determined by referenced to some external standard. Pg. 324
A. Incompleteness of a contract - Contracts are incomplete in two distinct senses. First,
relevant terms may simply be absent, leaving gaps in the contract. Second, a contract may
also be incomplete in that it is insensitive to relevant future contingencies. Pg. 328 (class
notes) If the contract is incomplete or indefinite, first look to the document itself, then to
any outside evidence such as communications and conversations that have been held
under the negotiation phase, and finally, look to the industry standard to apply what the
industry may find to be the normal "gap filler" for the contract based on the type of
industry involved.
B. Indefiniteness and absence of terms
1. Gap fillers - In determining a price when one is not listed in the contract itself, whatever
mechanism used on previous contracts is applied. A judge will determine the proper gap filler in
the contract looking to the meaning of the text, outside conversations held about the contract,
and finally the industry standard.
2. Minimum required elements
C. Consideration (bargained-for exchange)
(a)Types of consideration - One party has given something to the other party. it can be a
promise, the promise must be bargained for and both sides must have a detriment. (class
notes)
(1) Past consideration is not consideration. You can not bargain based on
something that was negotiated in the past but does not become part of the current
agreement.
(b) Failure of consideration - Was something exchanged, money, goods, services?
If no, then there is failure of consideration.
(c)Promise as Consideration - A promise creates a duty, a condition postpones a
duty. See, Broadman v. Ledbetter (Also see pg 95)
1. Conditional Promises - a promisor who seeks a promise in return is not, to be
sure, unconcerned with the performance of the return promise. (pg. 95)
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2. Condition - A promise is conditional if its performance will become due only if
a particular event, known as the condition, occurs. (pg. 95) Also See, Condition
Precedent.
Kirksey v. Kirksey "It is often difficult to determine whether words of condition in a promise
indicate a request for consideration or state a mere condition in a gratuitous promise. An aid,
though not a conclusive test in determining which construction of the promise is more reasonable
is an inquiry whether the happening of the condition will be a benefit to the promisor. If so, it is
a fair inference that the happening was requested as a consideration. . .
In case of doubt, where the promisee has incurred a detriment on the faith of the promise, courts
will naturally be loath to regard the promise as a mere gratuity, and the detriment incurred as a
mere condition. But in some cases it is so clear that a conditional gift was intended that even if
the promisee incurred detriment, the promise has been held unenforceable."
D. Obligations enforceable without a bargained-for exchange (including reliance and restitution)
E. Modification of contracts - See Rescission and Reformation.
F. Holdouts - parties who seek to extract gains by delaying or otherwise raising the costs of
contractual formation. See Mattei v. Hopper. Also see pg. 104.
G. Reliance as a basis for enforcement - (Also see pg.1 outline under Theories of Promissory
Reliability) If someone changes their financial position based on the fact that they relied on the
promise of another in return for that relinquishment, then the one who made the offer that gave
rise to the change is in breach of contract if they do not complete the obligation. (pg. 118)
Ricketts v. Scothorn.
1. Family promises - a promise made by one family member to another on which one of
the party relies. (pg. 122)
2. Promises to convey land - The recipient of a promise to convey land relied on by the
party moving to the land and making improvements. Id. & Freeman v. Freeman.
3. Promises Coupled with Gratuitous Bailments - Id. a person entrusted temporarily with
another's goods or property makes a promise to the owner respecting the property, on
which the owner relies. Siegel v. Spear & Co.
4. Charitable Subscriptions - A person promises to contribute to a non profit organization.
Also see Restatement, First §90.
(IV) Defenses to enforceability
1. Incapacity to contract
A. Age (OACLLS - first L, must be of legal age to contract)
B. Insanity (Same as age)
C. Death or adjudication of incapacity of the offeree terminates the offer
2. Duress and undue influence - A contract entered into under duress and undue influence may
be void.
3. LLMUFFED contracts - (class notes) Legal ability to contract, no laws preventing contract,
mistakes, unconsionability, fraud, fiduciary undue influence, estoppels, and duress.
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(1) Unconscionability - The request of the contract is beyond the normal scope. The
contract tricked a person into indentured servant-hood. This can yield triple damages in
court. The contract is too unfair to one side, oppressive, shocks the conscience (contract
for sex worker...), be beyond all standards of fair dealings.
(2) (Class Notes) Unconscionability may result from: (1) A person agreeing to a contract
while under duress; (2) Unfair or surprise element of the contract; (3) Undue influence Where a party exercises unreasonable pressure, especially if the contacting party holds
something over another.
D. Fraud - fraud in factum, fraud in the inducement, fraud of concealment, and fraud in
execution.
(1) Fraud in factum - simply put, you had no idea what you were agreeing to when you
signed.
(2) Fraud in execution - you have been tricked into signing something you did not intend
to sign. Both of these are somewhat interchangeable because they deal with the fact that
the person did not know what they were signing. Ex. You have a deed to be motorized
but the notary is defrauded by signing a different document under the guise of signing the
deed.
(3) Fraud in the inducement - misrepresentation of the document in the inducement phase
for the contract. You have been lied to about the contract. This has 4 elements, FIRD and
all 4 must be met.
(a) F - False statement of material fact. It can not just be opinion or puffing, must
be material. For example, you tell someone a vehicle gets 30mpg, but it only gets
18 and they bought the car specifically because they needed a vehicle that got
30mpg.
(b) I - Intention to deceive the other party and the plaintiff had to rely on the bad
information.
(c) R - Reliance on the false statement to make the decision.
(d) D - Damages happened. Without the damages, there can be no suit.
(4) Fraud of concealment - Deceit or being deceived by omission of a material fact. If
there is significant damages, the contract would be rescinded because there was never a
contract, ana contractus, quantum meruit. Also if there is value or unjust enrichment.
E. Statute of frauds (Pg. 339) - First we must determine if the contract falls under any statue of
frauds (listed below in mylegs). This is a term of art if the contract falls "within a statute of
frauds." Once we know whether there is a contact and whether that contract falls within one or
more statutes, we then ask whether the contract is set forth in a writing that meet the statutory
requirements. The legal shorthand for this is whether the writings "satisfy" the statute. pg. 341
(1) One year provision - Pg. 348 - An agreement that cannot be performed within the year
following its making is unenforceable unless circumstances persuade a court otherwise.
The year runs from the time of contracting to the time for completed performance, not
from the time of contracting to the time of a dispute as to the terms of the contract and the
performance need not take more than one solid year to complete. C.R. Klewin, Inc. v.
Flagship Properties, Inc.
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F. MYLEGS – You must have a written contract for it to be enforceable. Pg. 339. The original
statute of frauds listed six categories of contracts that would be enforceable only if in a signed
writing. (1) Executor or administrator of an estate. (2) Suretyship (answer the debt of another)
(3) Marriage (4) Land contracts (5) A contract that is not to be performed within one year of its
making (the one year provision) (6) Sale of goods.
(1) Even within an action for breach, the Statute does not affect whether a
defendant may raise a defense, even if the contract is unenforceable against the
plaintiff. (Pg. 342) see, Restatement 2d §§ 140 and 143.
2. And it may be effective against a third person who is neither a transferee nor a
successor to a party to it, as in a cause of action for wrongful inducement to
breach. Id. See, Restatement 2d §144.
(a) Fuller: Evidentiary, Cautionary, and Channeling functions. The evidentiary function is
the most referred to... a writing that describes the parties and the transaction is evidence
that the parties fact made a contract. Writings take more time to prepare than oral
promises, and the extra time allows the parties to an agreement to think further about
their transaction and possibly change or abandon it. The channeling function lets the
parties to a contract tell the court that they really do want their promises to be enforced.
(Pg. 346)
(b) Perillo: Clarifying function and managerial function. The clarifying function is the
working out of disagreements, ambiguities, and omissions as a result of having to put a
contract into writing. The managerial function is the use of standard writings to control
subordinate employees and make it possible for everyone in an organization to have one
reliable source for the terms of each agreement.
(B) Oral agreements can be enforced if a party relied on the agreement to their detriment.
In other words, if you spent money or invested in the item or service based on an oral
agreement, the contract may be enforceable.
(1) Satisfying the Statue of Frauds - Pg. 370, et. al. If a contract falls within a statute of
frauds, thin it must be set forth in a signed writing in order to be enforceable, as it is
usually put, in order to Satisfy that statute of frauds.
(a) Satisfy - pg. 371 - For a writing to satisfy the gernal SoF, it must do 4 things.
(1) it must identify the parties to the contract. (2) it must show that those parties
made a contract. (3) it must set forth the nature of the contract, including some
indication of what the parties contracted about. (4) it must state the essential terms
of the contract.
Exception - Sale or transfer of land. The courts normall require that the contract
describe the land clearly enough that the seller knows what she is conveying and
the buyser knows what he is buying. The purpose of a description in a written
conveyance is not to identify the land, but to afford a means of identification.
Ardmore, Inc. v. Rex Group, Inc.
(b) Evidentiary function - pg. 373. if the evidentiary purpose is to state the terms
of a contract so taht the parties or a judge may be certain in the future just what
those terms are, the a memo would need to be far more detailed.
(c) Two or more documents - pg. 375. All that is required is that these writings
shall so clearly evidence the fact that a contract was made, and what are its terms,
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that there is no serious possbility tht the assertion of the contract is false. Crabtree
v. Elizabeth Arden sales corp.
(d) Signing - pg. 380. How a signature on one document may be attributed to the
others, which allows the parties to meet the requirement that a writing be signed
in order to satisfy a SoF. Signed includes using any symbol executed or adopted
with present intention to adopt or execute a wirting. See, UCC §1-201(b) (37)
(e) electronic signatures - pg. 382. Uniform Electronic Transactions Acta. UETA
applies to contracts for the sale of goods that are govered by Article 2 and to most
contracts governed by the common law. §3 provides that if a law requires a record
to be in writing, an electronic record satisfies the law. and if a law requres a
signature an electronic signature satisfies the law. This is also known as "E-Sign"
(2) Statute of Frauds and the sale of goods. Pg. 383
(a) Except as otherwise provided (exceptions) a contract for the sale of goods for
the price of 500 or more is not enforceable by wy of action or defense unless there
is some writing sufficient to indicate taht a contract for the sale has been made
between the parties and signed by the party against whom enforcement is sought
or by his authorized agent or broker. A term agreed upon but the contract is not
enforceable under this paragraph beyond the quantity of goods shown in such
writings. The only specific term a writing needs to state is the quantity.
(2) Statute of Frauds isn't actually a statute, it is an exception to the common law.
Any contract within the SoF is enforceable if it is evidenced if it is signed by or
on behalf of the party to be charged.
(a) It identifies the subject matter of the contract.
(b) It binds the parties.
(c) It states terms of the promises to be performed.
(d) Section 1.39 of the SoF requires a signature in one place, even if there
are multiple documents that show a contract was formed.
(3) Exceptions to the SoF. Pg. 386, et. al.
(a) Most exceptions are rooted in reliance. Performing the contract in full or in
part on the belief that it was enforceable. Another type is arises as an offshoot of
estoppel; the breaching party is estopped to deny that it has made a contract if the
other party has in some manner relied on the statements of the breaching party.
Each serves the evidentiary function of the SoF, because the party seeking to
enforce the contract would not have acted as it did had there not been a contract in
place.
1. A person is estopped from denying a promise if the other person performed
based on reliance. (Short form of (a)
(b) Restitution - pg. 386. if the breached-against party has performed, then the
other party has presumably derived some benefit from that performance.
Restatement (Third) of Restitution and Unjust Enrichment §31(1)(b).
(c) Partial performance - May satisfy the evidentiary aspect of the suretyship
provision, but it does not satisfy the cautionary aspect nearly as well as does a
writing requirement. Restatement §130. If the goods are to be specially
manufactured for the buyer, the goods cannot be sold to others in the ordinary
course of the seller's business, and the seller has substantially begun making the
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goods or making commitments to get the goods. Beaver v. Brumlow pg. 389
Where an oral contract not enforceable under the SoF has been perfomred to such
extent as to make it inequitable to deny effect thereto, equity may consider the
contract as removed from operation of the SoF and decree specific performance.
Ejectment - a way to make someone leave property when they dont have a
lease. Different from eviction because this would apply to a squatter or
someone of that nature, not a renter. If you have a lease and file for
possession of the property, the case will be dismissed because the lease
falls under the district court. A purchase agreement filed in district will be
thrown out because it isnt a lease. For a lease purchase agreement, both
circut court and district court will dismiss it and the owner will lose the
land.
(d) Estoppel - The breached-against party could invoke estoppel only if it has
relied on a misrepresentation by the breaching party. If the breaching party had
falsely stated that it would execute a writing then it could be estopped from
asserting the SoF as a defense to enforcement. A person is estopped from denying
a promise if the other person performed based on reliance.
(1) Estoppel and UCC §2-201. Unless displace by the particular provision of the
UCC, the principles of law and equity, including the law relating to estoppel shall
supplement its provision.
(2)Read your Mail exception - pg. 403. between merchants if within a
reasonable time a writing in confirmation of the contract and sufficient against the
sender is received and the party receiving it has reason to know its contents, it
satisfies the requirements of subsection 1 aginst such party unless written notice
of objection to its contents i given within ten days after it is received.
(3) Judicial Admissions Exception - pg. 410. if the party against whom
enforcement was sought admits in his pleasding testimony or otherwise in court
that a contract for sale was made, then it is enfoceable up to the quantity of
goods admitted.
(4) A person is estopped from denying a promise if the other person
performed based on reliance.
(C) Contract of Adhesion - a standard form contract performed by one party to be signed
by another party in a weaker position, usually a consumer, who adheres to the contract
with little choice about the terms. (Black's Law Dictionary) (pg. 607, et. al)
(1) These fall under mass contracts (see, standard form contracts above in this
section) and do have advantages such as; they take advantage of the lessons of
experience and enable a judicial interpretation of one contract to serve as an
interpretation of them all; they simplify planning and administration and make
superior drafting skills more widely available; and they make risks calculable and
increse that real security which is the necessary basis of initiative and the
assumption of foreseable risks. Meaning, these standard contracts are cheaper to
produce, are typically integrated contracts, and all say the same thing with just the
contractee's name, date of signing, and other identifying aspects changing from
one to the other.
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(2) Abuse of the standard contract, or contracts of adhesion - (pg. 608) An
enterprise may have such disproportionately strong economic power that it can
dictate its terms to the weaker party. second, there may be no opportunity to
bargain over terms at all; the standardized contract is often a take it or leave it
proposition. Finally, standardized contracts are often used by a party who has had
the advantage of time and expert advice in preparing it while the other party may
have no real opportunity to scrutinize, and often no real means to understand, the
contract. (See, O'Callaghan v. Waller & Beckwith Realty Co.)
(3) Boilerplate Clauses - A term that is permanently affixed to a standard form
contract. So called Boilerplate because the metal plate attached to a boiler is
permanently affixed.
G. Suretyship Agreements - Pg. 362 - This type of contract makes one person liable for the
obligations of another. Example, cosigner or bail bondsmen. See Terms of Art at the bottom for
Surety, Principal, Suretyship and Guaranty. Langman v. Alumni Assoc. of the U. of Virginal,
Central Ceilings, Inc. v. Nat'l Amusements, Inc.
(1) Restatement 3d of Suretyship and Guaranty Pg. 366 if the surety's main purpose its its own pecuniary or business advantage, the
gratuitous or sentimental element often present in suretyship is eliminated, the likelihood
of disproportion in the values exchanged between surety and obligee is reduced, and the
commercial context commonly provides evidentiary safeguards, consequently, there is
less need for cautionary or evidentiary formality. Central Ceilings, Inc. V. Nat'l
Amusments, Inc.
H. Estoppel - (class notes) Stopped from raising an argument or bringing a claim.
(1)Promissory Estoppel example, I promised not to prosecute you if you walk on my
land, but if I try, you can claim PE and it will be thrown out. Essentially, anything agreed
to can not be used as a breach later in court. 3 elements: (a) requires a promise of conduct
(b) shows a change in the promisee (receiver, can also be stated that the promisee does
something based on the promise. (c) The promisee has a cost or interest in the promise
being fulfilled. Question: Is PE similar to consent in torts? Would this carry the same
weight as a defense for an intentional tort?
(2) Common law and equity estoppels - (class notes) stops a person from going back on
their word or it stops a person from litigating again.
(3) Equitable estoppel elements - (class notes) (a) a bad actor who usually must have
knowledge of true facts, communicates something in a misleading way, either by words,
conduct or silence. (b) the innocent party relies on that communication (c) the harm is
material if the actor is later permitted to assert any claim inconsistent with what was said.
(4) Issue Preclusion - (class notes) - collateral estoppel.
(V) Contract content and meaning
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(A) Parol evidence – (Pg. 489, et. al.) (per-el) Parol evidence is evidence that is extraneous to the
contract and shouldn’t be used unless it meets a condition for its admission. (pg. 776) Parol
testimony is admissible to prove a condition precedent to the legal effectiveness of a written
agreement if the condition does not contradict the express terms of such written agreement.
(1) Three questions are asked for parol evidence to be admissible. (a) Why are you
introducing it? (b) Was the contract integrated? (c) To what degree, full or partial? (Class
Notes)
(a) When only part of the agreement is integrated, the same rule applies to that
part, but parol evidence may be used to prove elements of the agreement not reduced to
writing. (Masterson v. Sine, Pg. 497)
(2) The Parol evidence rule may preclude a determination that an agreement made prior
to or contemporaneously with the writing, but not refleced in it, is part of the contract. It
is a rule of substantive law that, when it applies, precludes any proof that the terms of the
contract are other than as expressed in the writing. (pg. 489) See terms of art for rule of
substantive law.
(3) Integrated agreements and the Restatement - (pg. 496) The first step is to see if the
writing has been adopted as a final expression of one or more terms of an agreement. If
no, then the rule does not apply. If yes, the agreement is known as an integrated
agreement with the consequence that evidence of prior agreements or negotiations is not
admissible in evidence to contradict a term of the writing. (See Restatement §§ 209, 210,
and 215 below)
(4) Test of complete integration - a writing cannot of itself prove its own completeness,
and wide latitude must be allowed for inquiry into circumstances bearing on the intention
of the parties. (pg. 501) Integration is a matter of the parties' intention, such clauses can
provide strong evidence of that intention.
(5) Merger clauses - If there are no promises, verbal understandings, or agreements of
any kind, pertaining to this contract other than specified herein or the writing constitutes
a complete and exclusive statement of all the terms of our agreement.
(6) Validity of Agreement - It is generally held that, since the parol evidence rule
proceeds on the assumption that there is a written agreement, it does not bar extrinsic
evidence to show that the written agreement is not valid. it does not, for example,
preclude the use of extrinsic evidence to show that the writing was a sham, not intended
to be enforced, or that a recital of a performance as consideration is false. (See
Restatement §214) (Pg. 504)
(7) Fraud - it is also generally held that the parol evidence rule does not preclude the use
of extrinsic evidence to show fraud in the inducement of the contract. Also, the parol
evidence rule does not preclude the use of extrinsic evidence to show promissory fraud
(where a promisor makes a promise not intending to perform it.) (Id.)
(8) No Oral Modification clauses - When a party seeks to prove that the provisions of a
carefully drafted written contract where varied by a conversation between the parties
after the contract was made. The parol evidence rule does not speak to this problem and
thus does not preclude this proof, though it is not dissimilar to the problems to which the
rule does speak. The issue is that this has not been effective. The reasoning is that any
prior agreement, including the no oral modification clause itself, can be modified by a
later agreement. "The hand that pens a writing may not gag the mouths of the assenting
parties."
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(a) Even in those jurisdictions that honor no oral modification clauses, a party that
seeks to escape the effect of the clause can often so so by showing reliance on the
oral modification. "When an owner requests a builder to do extra work, promises to
pay for it and watches it performed knowing that it is not authorized in writing, she
cannot refuse to pay on the ground that there was no written change order. (Pg. 507)
(b) Understanding the parties intent and parol or extrinsic evidence - The
admissibility of extrinsic evidence, particularly evidence of the parties' prior
negotiations, is one of the most troublesome aspects of contract interpretation.
Courts have traditionally employed a 2 stage process often referred to as the "plain
meaning rule." In the first stage, the judge determines whether the language in the
written agreement, with respect to the dispute in question admits of only one
plausible meaning or, rather, is ambiguous. If the language is ot ambiguous, extrinsic
evidence as to its meaning will be excluded. In the second stage, the court
determines the meaning of the contract language. If in the first state the language
was found to be ambiguous, extrinsic evidence as to its meaning will be admitted to
inform the court's determination of the meaning of the contract language. (Pacific
Gas v. G.W. Thomas, Pg. 508)
B. Interpretation
C. Omitted and implied terms
D. Exculpation
(VI) Limits on the Bargain and its Performance (pg. 593, Ch. 6)
A. (See Restatement §79) Standard Form Contracts - Industry drafted contracts that are
offered en mass to the public. Examples of these could be contracts to purchase a vehicle or
join a gym. (pg. 593 and Section 2) (See also adhesion)
B. Adhesion - A contract where one party with significant bargaining power enters into a
contract with another who has little bargaining power. This type of contract is very
unilateral and can be unenforceable in court if it is found to be unconscionable. The idea
behind it involves things like you will only provide food and water to someone if they
complete all of a given task. Pretty much the entire concept of the democrat party in
America, "we are your government and if you give everything to us, we will distribute it
out as we think you need it."
C. Ambiguity - Words can have more than one meaning. The court decides matters of
ambiguity in contracts (see rescission) Ambiguity is dealt with under common law because
the UCC does not deal with it and says to apply common law.
(1) Contra Preforindum - (class notes) against the person who wrote the contract. Used to
interpret ambiguity in contracts. The law interprets any ambiguity against the person who
wrote the contract.
(2) Textual approach - (class notes) how the word is being used in a document.
(3) Contextual approach - (class notes) looking outside the document to determine what
makes more sense. May include looking at the industry standard in some cases. The court
prefers textual approach (Prof. Stanley and the sterile environment example)
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D. Methods of Interpreting Ambiguous Contracts - (Pg. 524) - A word is vague when its
applicability in marginal situations is uncertain, as is the case for the word green to
describe a color, clean energy, etc. However, drafters sometimes find vague terms useful
as a means of delegating decisions to a later adjudicator at such time as a dispute on
particular facts arises. Use of ambiguous terms is bad drafting, where the use of vague
terms is often used to describe an element that will be used later to determine the
specifics. The example from the book is "tons" is that American or Metric? If the term
was used to describe a general aspect of a delivery, then that amount will be determined
by the standard use in the industry, ei. ton of steel in the U.S. would be based on the
typical measurement used by the industry.
E. Unfairness - (pg. 594, et. al) If a contract is too one sided, or unfair, typically on the
side of the drafter, the contract may be voided. (See, McKinnon v. Benedict, pg. 595)
"Specific enforcement of a contract may be refused if the consideration for it is grossly
inadequate or its terms are otherwise unfair, or its enforcement will cause unreasonable
or disproportionate hardship or loss to the defendant or to third persons, or it was induced
by some sharp practice, misrepresentation, or mistake." (where the Benedicts bought a
camp with an advance from the McKinnons which was paid back in 7 months, yet
required the Benedicts to not improve the property for 25 years.)
1. If the consideration was equitable to both parties at the time of drafting, but
due to the death of the contractee, the cosideration was minimal, the contract
may still be enforced. (See, Tuckwiller v. Tuckwiller, Pg. 598)
F. Price Regulation - (pg. 604) - The arguments against courts' inquiring into the relative
value of the consideration in a contract between business men dealing at arm's length
without fraud have been summarized as follows (1) the efficient administration of the law
of contracts requires that courts shall not be required to prescribe prices. (2) the test of
enforceability should be certain and should not be beclouded by such vague terms as fair
or reasonable as tests of validity. (3) There is still the somewhat old-fashioned theory that
persons of maturity and sound mind should be free to contract imprudently as well as
prudently." Plain English - courts do not look at prices of things when parties enter into a
contract because they had the opportunity to discuss it and any price issues should have
been part of that negotiation. Also, in point 3, don't be a baby, you are grown, don't go to
court because you suddenly feel like you got overcharged, you knew what you were
doing, unless of course, there is fraud, which can result in treble (triple) damages. (Black
industries v. Bush, pg. 601)
G. Fairness, excessive profits and Government contracts - (Pg. 605) Federal contracts are
awarded on the basis of full and open competition. (bid system). Excessive profits may
also result when a party acts egregiously in the performance of a contract like submitting
a claim for work that was not performed. Question: How would this be different from
simple fraud? Congress enacted the False Claims Act, current version, 1986. "Any person
who knowingly presents, or causes to be presented, to an officer or employer of the USG
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a false or fraudulent claim for payment is liable to the US for a civil penalty of not more
than 10k, and 3x the amount of damages which the government sustains, or treble
damages. USC §3729." For Qui Tam actions, see terms of art.
H. Duty to read Contract Terms - (pg. 623) In the absence of fraud, one who signs a
written agreement is bound by its terms whether he read and understood it or not, or
whether he can read or not. A person who cannot read had a duty to find someone to read
the contract to him.
I. Policing consumer contracts - (Pg. 626 et. al) - Protective legislation can be grouped
loosely into three types. The first, prompted by concern about the fairness of particular
terms or of the exchange as a whole, seeks to control the terms of exchange. A second
type proceeds from the assumption that consumers can best improve their position
through well-informed shopping, facilitated by various disclosure requirements. the third,
premised on the belief that consumers suffer systemic handicaps in the effective
enforcement of their rights, focuses on remedies. (See, Doe v. Great Expectations, pg.
629)
J. Unconscionability - (pg 633)A contract is so one sided that the terms are
unconscionable or "shock the conscience" as to make it invalid. See UCC §2-302.
K. Good Faith Contracts - (Chapter 6, section 4)
(1) See the descriptions for fraud in factum, inducement, concealment. (ctrl+Click Here)
L. Public Policy - (class notes) Limits to contract due to public need. Ex. estopped from
building a condo on the beach because it would destroy a particular habitat where and
endangered species is known to inhabit. Also, anything that would cause the general
public to suffer some loss by the enforcement of the contract.
Rule 65B - Temporary restraining order causing someone to stop doing
something, like cut trees. For any rule 65 A or B, you must show irrepreable
injury and there is no legal remedy (money) that will make the party indifferent to
the breach. See, McKinnon v. Benedict, Pg. 595
M. Balancing the Equities (class notes) - How badly will the parties be damaged? The
one with the greater damages will usually prevail. (Is this similar to Comparative and
Contributing negligence?)
N.
O. Probative value - (class notes) This information has little ability to influence the
outcome.
P. Performance Limitations (class notes) - Good faith performance. Implied warranty of
good. "Good faith is the absence of bad faith." (Prof. Stanley)
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(1). Good Faith - (pg. 673) - The implied duty of good faith in performance and enforcement of a
contract-also known as the implied covenant of good faith and fair dealing-is another such term,
added to the parties' agreement both by the common law and the UCC. (See R §205 and UCC
§1-304)
(A) Good faith versus bad faith (Pg. 678-79) "(A)sk(s): What, in the actual or
hypothetical situation, does the judge intend to rule out by his use of this [good faith]
phrase? Once the relevant form of bad faith is thus identified, the lawyer can, if he
wishes, assign a specific meaning to good faith by formulating an opposite for the species
of bad faith being ruled out. Ex. A judge may say "a public authority must act in good
faith in letting bids." He is in effect saying, the defendant acted in bad faith because he let
bids only as a pretense to conceal his purpose to award the contract to a favored bidder.
Good faith then, takes on specific and variant meanings by way of contrast with the
specific and variant forms of bad faith which judges decide to prohibit.
(B) Good faith performance of a contract (pg. 680-81) Good faith performance of a
contract emphasizes faithfulness to an agreed common purpose and consistency with the
justified expectations of the other party; it excludes a variety of types of conduct
characterized as involving bad faith because they violate community standards of
decency, fairness or reasonableness. Corts might override agreed contract terms on
grounds of contractual morality when the contract is unconscionable or otherwise
unenforceable at formation, when estoppel or waiver are properly invoked, or when
performance is impossible or commercially impracticable.
(C) (For a case on good faith, see Northwest, Inc. v. Ginsberg. Pg. 683)
(D) Bloor v. Falstaff Brewing Corp. I do not understand this case Pg. 689
(2) Public Policy - (Pg. 697) - While good faith protects one party from another, Public Policy
protects everyone else from both parties. There are two general categories of contracts that are
unenforceable due to public policy: It violates specific criminal laws and are thus "illegal
contracts" or, contracts that will cause a danger or unwanted situation. For example, if building a
something would destroy an endangered species, the contract will not be enforced. In this
situation, the book discusses finding legislation that relates to the subject of the contract. Prof.
Stanley's explanation is much more succinct, so stay with the class notes on this one. (See,
Blossom Farm Products Co. v. Kasson Cheese Co., Inc. Pg. 701. Good case about someone
trying to pass off imitation cheese as real, the court took issue because they were not truthful in
informing the public that the cheese did not meet the standard of real cheese.)
(A) Clean Hands (Pg. 706) - Suits for equitable remedies such as specific performance
and rescission are sometimes disposed of on the maxim, He who comes into equity must
come with clean hands.
(3) Inducing official action (bribery, Pg. 710) The authorities very generally hold that a contract
to pay for services to be performed in the endeavor to obtain or defeat legislation by other means
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than the use of argument addressed to the reason of the legislators, such as, for example, for the
exertion of personal or political influence apart from the appeal to reason as applied to the
consideration of the merits or demerits of the legislation in question, is an illegal contract. Or,
bribing, blackmailing, threatening, or other means of getting an official person, like a senator, to
do something you want, even if it is in a contract, is illegal. See, Campbell Co. v. Howard and
Lee. Also see; the Anti-Kickback Act of 1986 and The Foreign Corrupt Practices Act. Check out
the Judicial Bribery note on page 712, its funny and memorable.
(4) Licensing Laws (Pg. 715) - "[O]ne who is required by law to procure a license to conduct any
trade, calling, or profession may not recover for services rendered or property sold, without first
obtaining such license." The author goes on to state that this rule that was pulled from Sirkin v.
Fourteenth St. Store (read on westlaw, essentially a case where a middleman was paying
customers to shop and then getting commission for it was not seen as bribery). However, in the
case of Trade-Winds v. Stewart (pg. 715, in text) Stewart did not have to pay the whole of the
invoice after contracting with Trade-Winds to clean mold because TW did not hold the
appropriate license to clean mold.
(A) Judicially Created Public Policy - (Pg. 716) - When there is no clear statutory
prohibition against a particular kind of agreement, the court must be satisfied that a
strong public policy can be articulated. The guiding principle is one of protecting some
aspect of the public welfare. (See R 179)
(B) Non-Compete Clauses (Pg. 722) If a non-compete clause is found to be unreasonable,
what happens? The first rule is the Blue Pencil rule under which courts cross out words to
the extent that a grammatically meaningful reasonable restriction remains after the words
making the restriction unreasonable are stricken. The second approach is the rule of
reasonableness, under which the covenant will be enforced only to the extent reasonably
necessary to protect the employer's interest.
(C) At-Will Employees (Pg. 723) There is a general agreement that to terminate an
employee, even under at will jurisdictions, may be actionable. The obligation of good
faith and fair dealing imposed on an employer requires that the employer be liable for the
loss in compensation that is clearly related to an employee's past service. Essentially, if
you fire someone for wrongful discharge, revenge or something along those lines, you
can be sued for it. See, Sheets v. Teddy's Frosted Foods. Pg. 724. Also be aware that
IIED can arise from wrongful discharge, see pg. 733.
(VII) Performance, breach, and discharge (Chapter 7. pg 755)
(1) One who has committed oneself in exchange for a return performance is entitled to a
continuing sense of reliance and security that the promised performance will be
forthcoming when due. (Pg. 756)
(2) Conditions - A condition is an event, not certain to occur, which must occur, unless
its nonoccurence is excused, before performance under a contract becomes due. (Pg. 756,
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See also condition precedent) 224 Comment b - The mere passage of time, as to which
there is no uncertainty, is not a condition.
(A) Whatever may be the subjective intention of a buyer in any particular case,
one can readily think of reasons why a buyer may make an offer contingent upon
financing by a specific lending institution or through a particular type of loan. (Pg.
758)
(B) Letters of Credit - (Pg. 763) A seller may,as a means of assuring payment for
goods, require a buyer to obtain a letter of credit from a bank. the bank, by
issuing its letter of credit at the buyer's request, undertakes with the seller that it
will pay against the seller's orders in an amount equal to the purchase price, on
condition that the orders, known as drafts or bills of exchange, are accompanied
by documents affording control over the goods.
(C) The importance of prompt delivery by a seller of goods generally derives
from the circumstance that goods, as contrasted with land, are particularly likely
to be subject to rapid fluctuations in market price. (See Restatement §242)
(3) Separate Contracts - (Pg. 764) - A party's breach of a contract does not allow the other
party to terminate a different contract subsisting between the two, or even to suspend
performance of the other contract, unless the parties have otherwise agreed. If the
transactions are embodied in separate documents, each complete in itself, if the sense that
ascertaining the terms does not require consulting the document for the other transaction,
they are separate contracts.
(4) Three Conditions Exist - (Gleaned from the text on page 765-66) - (1) You must
comply with the condition or pay damages. (2) You must comply with the condition or
you do not get the bonus. (3) You must comply with the condition or pay damages and
forfeit the bonus. If language is unclear, a court will prefer an interpretation that imposes
a duty rather than a condition.
(5) Forfeiture - (pg. 771) - Forfeiture is used to refer to the denial of compensation that
results if the non-occurrence of a condition causes the obligee to lose his right to the
agreed exchange after he has relied substantially on the expectation of that exchange, as
by preparation or performance. The law requires such a claim of dissatisfaction to be
made in good faith, rather than in an effort to escape a bad bargain and the party's
dissatisfaction must relate to the specific subject matter of the condition, but as long as
one of the sources of dissatisfaction gives him a right under the contract to repudiate, the
fact that there are other sources of dissatisfaction is immaterial. (See Restatement §227)
(6) Third-Party Satisfaction - (Pg. 773) - Some of the risk inherent in making the other
party's duty conditional on its own satisfaction can be eliminated by making its duty
conditional instead on the satisfaction of an independent third party, perhaps an expert of
some kind. These terms are common in construction contracts, where the owner's duty to
pay the contractor is often conditional on the satisfaction of the architect.
(7) Constructive conditions - (Pg. 778) - Two main instruments of the law's development
in this regard are the conceptions of constructive conditions and material breach. a party's
failure to render a performance-or in some cases its failure to offer a performance-is a
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possible excuse for the non-performance of a duty undertaken by the other party.
moreover, a prospective failure to perform may have the same effect. a traditional way of
affirming these effects is to say that the commitments exchanged by the parties are
dependent covenants. (I need class notes on this concept)
(8) Time for performance - (pg. 780-81) - Because fo the doctrine of constructive
conditions, fixing the time for performance under a contract has the important effect of
allocating the risk that one party will perform but will not receive the other party's return
performance. If the contract is silent, default rules may fix the times for performance.
One of the most common is that when the giving on the other side, the doing must take
place before the giving.
(9) Concurrent conditions and tender - (pg. 785) - Tender of delivery is a condition to the
buyer's duty to accept the goods and to pay for them. And tender of payment is a
condition to the seller's duty to tender and complete any delivery. A fomral tender is
seldom made in business transactions, except to lay the foundation for subsequent
assertion in a court of justice of rights which spring from refusal of the tender. Courts are
not often called on to say what is or is not a formal tender of performance under a
contract.
(10) Tender - (Id) - In the stricter sense, it contemplates an offer coupled with a present
ability to fulfill all the conditions resting on the tendering party and must be followed by
actual performance if the other party shows himself ready to proceed, but something less
will suffice to put the other party in default if he fails to proceed in some manner.
Tendering a check is commonly sufficient under the tender rule unless the seller demands
payment in legal tender and gives any extension of time reasonably necessary to procure
it.
(11) The Perfect Tender Rule - (Pg. 786) - (See UCC §2-601) - First the buyer should not
be required to guess at his peril whether a breach is material; second, proof of materiality
would sometimes require disclosure of the buyer's private affairs such as secret formulas
or processes. A seller may cure defective tender if the time for performance has not yet
expired and in some situations, even if that time has expired. UCC §2-608 allows a buyer
who has already accepted goods to revoke that acceptance and return the goods to the
seller only if the non-conformity substantially impairs their value to him. UCC §2-612
allows a buyer under a contract for delivery of goods in installments to reject an
installment only if a non-conformity as to the goods substantially impairs the value of
that installment and to claim a breach of the whole contract only for a breach that
substantially impairs the value of the whole contract.
(12) Wrongful and ineffective rejections - (Pg. 791) - First, the buyer must not have
accepted the goods, for acceptance precludes rejection. Second, the goods of their tender
must not conform to the contract. Third, the seller must either have no cure right or must
not have exercised it effectively and rightfully. Even if these three elements are in place,
the buyer still must reject the goods in a proceduarlly proper way under UCC §2-602;
rejection must be within a reasonable time after delivery ar tender and the buyer
seasonably notified the seller of the rejection.
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(A) Four Possibilities - The rejection is substantively proper or it is not, and either
it is procedurally proper or it is not. A Substantively proper rejection is termed
rightful and a substantively improper rejection is wrongful. A proceduarlly proper
rejection is effective; a procedurally improper rejection is ineffective.
(13) Suspending performance and terminating the contract (Pg 803)
(A) First step - determine whether there is an uncured breach by the other party. If
so, ask whether the uncured breach is a breach of a duty that was part of an
exchange of promises (material breach). Third, whether the breach went to a
performance that was to take place before that of the aggreved party. The first
material breach may excuse any later breaches by the other party.
(B) Material Breach - (See Restatement 241) (Pg. 804) If the breach is has been
substantial performance the aggrieved party has no choice but to continue
performance and treat the breach as a partial breach. If the breach is material the
aggrieved party has a choice: either continue performance and treat the breach as a
partial breach or stop performing and treat the breach as a total breach. If you
treat as a material or total breach and you are wrong that their breach was
not material, you may be liable for damages due to your breach. (See, Walker
and Co. v. Harrison, pg. 805)
(14) Irrelevance of good faith - (pg. 809) - Good faith will not prevent a statement from being a
repudiation. If a good faith contract interpretation is made as a defense to a claim of breach by
anticipatory repudiation, then it should be a defense where the repudiating party believes
wrongly but in good faith that there is no contract at all or that the contract has been terminated,
modified, or rescinded.
(15) Termination and notice - (pg. 815) In a world governed by an objective approach to contract
law, notice is vital. If a promisor knows that its promisee is aggrieved, the promisor can take
steps to remove the cause for grievance.
(A) Golden Silence - (pg. 819) When a party believes it is entitled to terminate a contract
at will, it often will refrain from stating its reasons. the party may also refrain from
undertaking a complete investigation of possible grounds for termination. Should it turn
out that that contract was not terminable at will, it would be unfair, without some
additional showing to preclude the party from asserting legitimate grounds for
termination.
(16) After-acquired evidence - (pg. 820) a party terminated a contract without justification, but
later discovers facts that, had they been known, would have justified termination. The prevailing
view is that it can use those facts even though it was ignorant of them at the time of termination.
(A) Employment agreements - The use of after acquired evidence in connections with
employment agreements presents some policy concerns. these include fears that
employers and their lawyers will scour the employee's work record and interview coworkers in an attempt to dig up on the job misconduect that an employer might ignore and
tuck it away for the day a charge of discrimination is made, or that am employee might
endure repeated harassment or discrimination without complaint because she knows her
work record is not spotless.
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(17) Waiver - (Pg. 836-37)after a contract is made, an obligor whose duty is conditional may
promise to perform despite the non-occurrence of a condition or despite a delay in its occurrence.
An intentional relinquishment of a known right. A party that without consideration, has waived a
condition that is within the other party's control before the time of occurrence of the condition
can retract the waiver and reinstate the requirement that the retraction would be unjust. If there
has been reliance, estoppel may be used to keep the party from retracting the waiver.
(A) Anti-Waiver clauses Redux - Ad party may have a better chance to fend off a claim of
waiver if the contract contains an anti-waiver clause. such a cluase typically states that no
action or inaction by that party shall amount to a waiver of any condition of any duty of
that party.
(B) McKenna v. Vernon - (class notes) A repeated waiver of a condition cannot suddenly
be due if the other party had been relying on that waiver. If I say there is a late fee on the
gym membership, but I have always waived it for the member, then the late fee can not
suddenly be due because I have waived my right to collect it by my performance in the
previous breaches.
(18) Frustration of Purpose (class notes) - If what was contracted for is no longer possible, the
contractee is released from their duty. Ex. I contract a professional bodybuilder to come give a
speech at my gym, but the building burns down, I am not still liable for paying them even though
we contracted because there is no venue for them to come speak at.
(1) FOP Case Law - (Pg. 1096) - When an event neither anticipated nor caused by either
party, the risk of which was not allocated by the contract, destroys the object or purpose
of the contract, thus destroying the value of performance, the parties are excused from
further performance.
(A) Impracticability - (class notes) Something unforeseen happens which prevents
performance. Mere difficulty of performance will not excuse a breach of contract. The
doctrine of impracticability excuses performance of a duty if it has become unfeasible or
prohibitively expensive. See Restatement §261-264 (pg. 1021)
(B) Half Measures - (Pg. 1106, et. al.) A consequence that, because of the operation of the
concept of having to render any further performance, but does not serve to compensate
either party for losses incurred in reliance on the contract before the parties were excused.
A half measure relief is equivalent to a court imposed compromise.
(C) Reliance interest - In some circumstances, a court may grant relief on such terms as
justice requires including protection of the parties reliance interest.
(B) Force Majeure Clause - (pg. 1069) When, during the negotiation of a contract, a party
anticipates one or more events that it cannot readily prevent and that might impede its
performance, it may well introduce a term intended to excuse it from performing if the
impediment arises.
(19) Anticipatory Repudiation - (pg. 846) - In order to constitute a repudiation, a party's
language must be sufficiently positive to be reasonably interpreted to mean taht the party will not
or can not perform. Language that under a fair reading amounts to a statement of intention not to
perform except on conditions which go beyond the contract constitutes a repudiation. If the
repudiation is accompanied by a breach by nonperformance, it gives rise to a claim for damages
for total breach. May also be called anticipatory breach. Retracting a repudiation (pg. 858) - It is
possible for a promisor to retract its anticipatory repudiation, at least if it does so within a
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reasonable time. That reasonable time ends, when the aggrieved party materially changes its
position in reliance on the repudiation. (See R. §256) Also, a party who is delinquent in
performance, or threatened with inability can plead with the other for leniency without being
guilty of a repudiation.
(20) Exceptions for one-sided contracts - (pg. 852) - Exception for anticipatory repudiation. It is
generally accepted that if, at the time of the breach, the aggrieved party has fully performed and
the ohly remaining duty of performance of the party in breach is to pay money in independant
installments, the failure to pay one or more installments, whether or not couples with a
repudiation, will not give rise to a caim for damages for total breach.
(21) Acceleration clauses - (Id.) The exception in 20 is mostly avoided by the inclusion of an
acceleration clause. a typical clause may read, "On any default in payment of principal or
interest, the creditor may declare all amounts remaining payable immediately due and payable."
(22) Assurance of due performance - Ordinarily, an obligee has no right to demand reassurance
by the obligor that the latter will perform when his performance is due. However, a contract
imposes an obligation on each party that the other's expectation of receiving due performance
will not be impaired. When an obligee reasonably believes that the obligor will commit a breach
by nonperformance that would of itself give him a claim for damages for total breach he may be
entitled to demand assurance of performance. (see R. §251)
(23) Opportunism - (pg. 867) To insist that the other party perform first, so as to have the
protection afforded by the doctrine of constructive conditions. Another is to require the other
party to furnish a guarantee of performance by a reliable third party(suretyship?) or the right to
demand assurances.
(24) Breach of a separate contract - (pg. 867) The doctrine of constructive conditions cannot be
invoked where there has been a breach of a separate contract. This is so even if the separate
contract has been repudiated. Under commercial standards and in accord with commercial
practice, a ground for insecurity need not arise from or be directly related to the contract in
question. As a result, if a separate contract has been repudiated, the other party to a current
contract my be entitled to assurances of the contract still in force.
(25) Unjust enrichment - (Pg. 297-8) The retention of a benefit conferred by another not as a gift,
but instead in circumstances where compensation is reasonably expected for which the
beneficiary must make restitution or recompense.
(26) Strict Liability - It doesn't matter what- you knew, you still did something you were not
supposed to do. Ex. you sell a car to a mentally handicapped person. This person cannot enter
into a contract because their handicap prevents it under the statute of frauds (Legal ability to
contract). Since the person could not enter into a contract to buy a car, you are liable. And Strict
products liability - a merchant or dealer in kind must ensure the fitness of the item being sold.
Example, a car that has a faulty wheel that breaks while being driven would give rise to liability
on the manufacturer, even if the manufacturer didn't make the wheel but bought it from a third
party. They still had the duty to inspect the purchase for fitness of use on the vehicle.
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(27) Duty to inspect - The buyer has a duty to accept a good within a reasonable time. You have
the right to inspect any item before acceptance, however, if you chose not to inspect, you cannot
go back after acceptance unless there was not enough time to discover the flaw with the product.
(VIII). Remedies
The point of remedies is to make the person affected indifferent to the breach.
(1) Two common remedies for contracts. (class notes)
A. Rescission - If the judge determines the ambiguity is too great, the judge will rescind
the contract and call for a new one. Any work or goods that was performed will be paid
or returned. Quentum Meritus - The value of the work that was done to make everyone
whole again as they were pre-contract also known as status quo ana-contractus.
B. Reformation - The judge will order that the contract needs to be reformed so that it
reflects the initial purpose and intent of the contract.
(2) Reliance and restitution interests - Restitution can occur if during the course of negotiations
one party has conferred a benefit on the other, the recipient may be required to restore the
benefit, or its value. pg. 297. (see 298 for example from Markov v. ACB Transfer & Storage
Co.)
(1) Reasonable reliance on an unsigned promise can enforce that promise without a
signed writing, but the remedy granted is limited to avoid injustice. Restitution and
unjust enrichment.
(2)Significant circumstances to determine injustice or unjust enrichment include:
(a)Other remedies such as rescission and restitution. (b)The substantial character of the
action or forbearance. (c)The clear relationship between the action or forbearance to the
relied upon promise. (d) The reasonableness of the action or forbearance. (e) expectation
by the promisor.
(3) Repudiation - (class notes) refusing to complete a duty owed to the other because of a
perceived or actual breach on the other's part. example, a homeowner refuses to pay a builder
their contracted price because the contractor did not complete the work to the specifications of
the homeowner. The homeowner can sue after the fact, but substantial performance would hold
the homeowner liable. The wall may be the wrong color, but the contractor still painted it and
should be paid for the work performed.
(A) The recipient of the notice of repudiation can immediately sue. by doing so, they
terminate the repudiators opportunity to cure. If the recipient treats the repudiation as a
material breach rather than a partial, they may be awarded damages as a result of the
repudiation. Essentially, when someone has contracted and performed and the contractee
fails to follow through with their end of the bargain, a contractor has the opportunity to
accept the repudiation as final and sue for damages. Remember the sample case where the
buyer wanted an antique doll and agreed to buy it, but then backed out in writing. The
writing admitted a contract was formed and therefore, the seller could accept the
repudiation and resell the doll at a reasonable price but still collect the balance from the
original buyer because the buyer materially breached the contract by repudiating. DON'T
BE THE AGGRESSOR IN CONTRACT LAW!
(4) Emotional Distress and Contracts - (Pg. 980) As a general rule, damages for mental anguish
are not recoverable in a contract action, the law is in a state of flux. Where the contract is
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personal in nature and the contractual duty or obligation is so coupled with matters of mental
concern or solicitude, or with the sensibilities of the party to whom the duty is owed, that a reach
of that duty will necessarily or reasonably result in mental anguish or suffering, and it should be
known to the parties from the nature of the contract that such suffering will result from its
breach, compensatory damages, may therefor be removed. See, Lamm v. Shingleton, where the
Shingleton's, undertakers, intered the body of Mrs. Lamm's husband in a waterproof vault which
floated up during a rain and had mud in the casket. The Shingleton's refused to clean out the mud
and stated, "to hell with the whole damned business, it's no concern of mine." Awarded IIED
damages as a result.
(VII-B) Seller/Buyer Remedies
(1) Seller Remedies - SPARKLE - (a)Stopping Goods in Transit (b)Suing for the Contract Price
(c) Demanding Assurances (d) Re-Selling the goods to another buyer (e)Keeping the Deposit
but never more than $500 (f) Suing for Lost Profit. Doesn't include consequential damages. (g)
Exercising the right to reclaim goods delivered to the insolvent buyer.
(2) Buyer Remedies - CIDS WAR - (a)Cover (b)Incidental and consequental damages (c)
Damages for lost benefit of the bargain (d) Specific Performance (e) Breach of Warranty (f)
Acceptance revocation (g) Rejecting Non-Conforming Goods.
(3)Express Warranties - SAD - (a)Sample or model which is the basis of the bargain (b) Written
or oral Affirmation of Fact or Promise made by the seller relating to the goods. (c) Description
of the goods in ads, brochures or catalogs.
(4) Exceptions to SoF - SWAMP - (a) Specially made goods (b) Waiver (c) Admission of
Contract - If the other party admits to a contract, even in passing or if it is oral, it is a Judicial
Admission and the SoF will not apply (d)Material alterations to the contract - if you change the
reason the contract was drafted. (e) Part Performance or substantial performance.
(A) Material Alterations to a contract - (class notes) - (1) If modifying a contract will
cause a surpirse and hardship, it may not be enforced (2) Jurisdictional Difficulties,
requiring a merchant in another state to arbitrate locally (3) If the modification shortens
the statute of limitations, it may not be enforced (4) If the contract limits Tort liability,
those aspects may not be enforced (5) If the contract alters the UCC for "Risk of Loss" not
including Liquidated Damages clauses (6) Adding an arbitration clause unless it is
customary in the particular industry (7) If the contract negates a material warranty, express
or implied.
(B) Unforeseen Damages and limiting damages - (class notes) If we have no idea this
consequence can occur, it can not be included in the damages. Damages must be
contemplated, unforeseeable damages can not be actual damages. Also, damages that can
be avoided can not be claimed. If you had the opportunity to Mitigate the damages and
you didn't, you can't claim those damages in court.
(C) CAPS in contract drafting - (1) Contemplate the damages (2) Avoidable damages (3)
Pain and suffering (4) Speculative Damages. These are not recoverable, you must have
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reasonable damages. For the complete list, see Non-Contractible issues such as
unconscionably.
(5) Incommensurability and uncertainty - (Pg. 888) The inadequacy of money damages is
sometimes grounded in the belief that money offers no substitute for the promised performance,
as when breach leads to the deprivation of a loved one's companionship or the loss of a firm's
goodwill.
(6) Measuring expectation and expectation damages - (Pg. 905) The usual remedy for breach of
contract is an award of damages, typically based on the expectiaont interest. An award of
expectation damages is a sum of money that will, to the extent that money can, put the promisee
in the position he would have been in had the promise been performed. The promisee is then said
to have received the benefit of the bargain or to have been made whole. The question that must
be answered in expectation damages versus actual damages is, "What value would the promisee
have received had the breach not occurred?" The typical formula for this is Damages = loss in
value + other loss - cost and loss avoided.
(7) Stern v. Schlafer - (Pg. 920, case law) when there are a number of samll items of defect or
omission which can be remedied without the reconstruction of a substantial part of the building
or a great sacrifice of work or material already wrought in the building, the reasonable cost of
correcting the defect should be allowed.
(8) Lost volume Seller - (Pg. 935, R.E. Davis Chem. Corp. v. Diasonics, Inc.) A seller that could
sell to other buyers, but the contracted buyer does not skirt liability because he didn't sell to other
buyers. The first thing you get is the difference between the market price at the time and the
place for tender and the unpaid contract, plus incidentals, less expenses saved. If inadequate, you
get lost profit, plus incidentals.
(9) Limitations on damages - (Pg. 942, et. al) Three general limits are place on the award of a
party's expectancy.
(a) Mitigation - There is a requirement on the aggrieved party to take reasonable steps
to limit the accrual of damages. (See R. §350)
(b) Foreseeability - Limits the award to those damages that are reasonably foreseeable
by the promisor, which will often, but not always, imply limits on the recovery of
sentimental value and damages for emotional distress.
(c) Certainty - Restricts a party's recovery to only those damages that can be proven
with sufficient certainty.
(10) Limitations cont' - (Pg. 944) - There is a line of cases running back to 1845 which holds
that, after an absolute repudiation or refusal to perform by one party to a contract, the other party
cannot continue to perform and recover damages based on full performance. This rule is only a
particular application of the general rule of damages that a plaintiff cannot hold a defendant
liable for damages which need not have been incurred, or the plaintiff must, so far as he can
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without loss to himself, mitigate the damages caused by the defendants wrongful act. "Bridge to
nowhere damages" where the contractors for a bridge continued to perform after the county had
repudiated the contract, then sued for full performance. The court held that the plaintiff was not
due full performance damages because they should have stopped at the point of repudiation.
(11) Mitigation for the sale of goods, aka, cover - (Pg. 954, et al) In a market economy, it is
assumed that the injured party can generally arrange a substitute transaction and, under the
principle of mitigation, it is expected to do so. If the seller fails to deliver goods, the buyer can
go into the market and cover by obtaining substitute goods so that the buyer's damages should be
based on the difference between the presumably greater price that the buyer will have to pay on
the market and the lesser contract price.
(12) Buyer's damages for non-delivery or repudiation - (Pg. 949) The measure of damages for
non-delivery or repudiation by the seller is the difference between teh market price at the time
when the buyer learned of the breach and the contract price together with any incidental and
consequential damages provide, less expenses saved in consequence of the sellers breach. If an
aggrieved party awaits performance beyond a commercially reasonable time, he cannot recover
resulting damages which he should have avoided. When a buyer chooses not to cover, but to
seek damages, the market is measured at thet ime he could have covered, a reasonble time after
repudiation. Three possible interpretations of the phrase learned of the breach are;
(a) When he learns of the repudiation;
(b) When he learns of the repudiation plus a commercially reasonable time; or
(c) when performance is due under the contract.
(13) Retraction - (Pg. 953) The buyers option to wait a commercially reasonable time interacts
with UCC §2-611 which allows the seller an opportunity to retract his repudiation. The modern
view is that the recipient of a repudiation may urge its retraction without becoming committed to
further performance if it is not retracted.
(14)
(VIII) Third-party rights
(1) Privity - (Pg. 1117) When relief is sought for the breach of a contract, an objection often
made is that the claimant is not in privity with the promisor, that is, that the claim is not based on
a contract between the claimant and the promisor.
(A) Where this may not bar a claim is in Third Party Beneficiaries. These beneficiaries
may be eligible to enforce a contract because the contract gives them some benefit even
though they do not have privity.
(B) A claimant may be eligible to enforce a contract right by virtue of a transfer, or
assignment, to the claimant of that right, made by one who was a party to the contract.
(C) The most probable class of third party beneficiaries are those who are beneficiaries
of a life insurance policy.
(2) Incidental Beneficiaries - (Pg. 1118) A third party who may enjoy an advantage through the
performance of a contract, but has no enforceable interest in its performance. They may get a
benefit through the performance of the contract, but they are not in privity to it and have no
rights for the enforcement of it. Example from class notes: "A person in a subdivision contracts
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lawn care and maintenance for their residence. The others living in the subdivision are incidental
beneficiaries because the well manicured lawn and landscaping is pleasant for everyone and may
increase overall property value. However, if the lawn care professional breaches the contract
with the homeowner, the others in the subdivision have no right to a claim because they were not
the intended beneficiaries of the contract, only incidental beneficiaries."
(3) Intended Beneficiary - (Pg. 1119, Also see R 2d 302) The claimant has recognition of a right
to performance in the claimant is appropriate to effectuate the intention of the contracting parties.
This has two qualifications. See Lawrence v. Fox Pg. 1120
(A) The performance of the promise will satisfy an obligation of the promisee to pay
money to the claimant.
(B) The circumstances indicate that the promisee intends to give the claimant the
benefit of the promised performance. (R 2d 307) - a duty owed to an intended
beneficiary may be enforced by the promisee in an action for specific performance if
that remedy is otherwise appropriate. See, Seaver v. Ransom Pg. 1125.
(C) Intended beneficiary - (Class Notes) Must prove 4 things. (1) There was a contract
(2) A clear or manifest intention between Party A and Party B that Party C is the
intended beneficiary, (3) Must show that there is a breach. (4) Must show damages
because of the breach.
(4) Circumventing Privity (Intended beneficiary continued)- (Pg. 1119) A person, or firm, may
qualify to enforce a contract because it was made on behalf of that entity by a person acting as an
agent for the claimant - the claimant being known in that case, as the principal (Intended
beneficiary). (Pg. 1130) However, a contract can only result in an obligation to a third party if
both parties to the contract intended to create a direct obligation from the promisor to the third
party. in other words, the fact a third party may gain an incidental benefit is not enough to
support third-party beneficiary status. Ok, dumb guy phrasing: I'm driving in my truck with my
wife and a third party. My wife is hot and asks that I turn on the air conditioner and I do. The
third party benefits but has no say in the control of the AC. My wife gets cold and asks me to turn
it off, so I do. Third party complains, but I don't care because it's my wife's comfort that I am in
a contractual agreement with (marriage, it is a contract you know), not the third party. The third
party was just an incidental beneficiary.
(5) Third Party Liability - (Class Notes) - Once we prove a contract with a third party exists, then
the third party can step into the shoes and the defenses for the contract can be used against the
third party. if the promisor sues back or countersues, the third party could be liable. the limit is
that the liability cannot exceed the value of the contract.
(6) Anti-Assignment clause - (Pg. 1132) A clause placed in a contract that may bar a third party
beneficiary from the ability to enforce the contract. Ex. "Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason thereof shall be assignable by any
party to this Agreement without the prior written consent of the other parties." There are three
positions.
(A) It defeats the claim.
(B) It indicates that the claim has no merit.
(C) It has no bearing on the issue.
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(7) Creditor Beneficiaries - (Class Notes) A party promises to pay another's debt to a third party.
Here, John loans Nancy 300 dollars. Chris asks to borrow 300 from Nancy and promises to pay
John what she owes him to settle the debt between all three parties. If Chris does not pay John on
Nancy's behalf, John may may bring a claim against Chris for the debt.
(8) Note - (Class Notes) This is a promise to pay, but the creditor can not take the "stuff" from
the person.
(9) Mortgage - (Class Notes) Can be foreclosed and therefore exceeds the scope of a note. A
mortgage allows the creditor to take possession of the home from the buyer for lack of payment.
If I sell you the note but not the mortgage, you can't foreclose on the home. It becomes a promise
to pay only and is an idle threat.
(10) Third parties and Arbitration clauses - (Pg. 1156) Commonly, a third party to a contract
wants to pursue its claims in court, but the underlying contract contains an arbitration clause.
The courts generally hold that the beneficiary must take the bitter with the sweet; if she wants to
pursue a claim created under a contract, she can do so only in the venue chosen by the
contracting parties.
(11) Terms of delegation and the UCC - (Pg. 1160) UCC §2-210 Unless the language or the
circumstances indicate the contrary, the assignment is also a delegation of performance of the
duties of the assignor.
(12) Assignment - (Class Notes and Herzog case) Once you know about an assignment on your
client to pay a debt, you are bound to pay it. Herzog, the attorneys did not pay the assignment to
the doctor because the client said he would and didn't, therefore, the attorneys had to pay the
assignment.
(A) Checks are not assignments, they are similar to a note in that the bank
promises to pay from your available funds if the check is presented to the bank.
(13) Battles between the assignee and obligor - (class notes) also see the Thurman case. Here,
Thurman promised to pay a payday advance once he received his commission as a real estate
agent. However, Thurman had spent his paycheck plus some before receiving it and the obligor
who was to pay him was allowed to keep the funds because Thurman had not earned them. What
we used to call "eating your paycheck" in the food industry.
(14) Assignments and Modifications to contracts - (Class Notes) If you assign a benefit from a
contract and then modify the contract, the assignment may follow the contract. Rights to
payment, modification applies to the assignment. Modifications to not apply to collateral. Ex. If I
assign my house to my kids, the mortgage payment does not revert and I still owe the lender.
(15) Defenses to assignments - (Class Notes) Typically, a defense against the contractor(ee) may
be asserted against the assignee.
(16) Holder in due course - (Class Notes) someone who purchases something of value in good
faith without knowledge of a claim against the item or a defense against the purchase. They
bought the note or item and have no reason to believe they will not receive payment or the good.
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(17) Assignee liability - (Class Notes) An assignee may become liable for performance of a duty.
I. Restatement of Contracts, Second
Restatement § 1 - A promise or set of promises for the breach of which the law gives a
remedy, or the performance of which the law in some way recognizes as a duty.
Restatement § 17 – Requirement of a bargain. (1) Except as stated in Subsection (2),
the formation of a contract requires a bargain in which there is a manifestation of mutual
assent to the exchange and a consideration. (2) Whether or not there is a bargain a
contract may be formed under special rules applicable to formal contracts or under the
rules stated in §§82-94.
Restatement § 21 -Text, pp. 125-126-Lucy v. Zehmer, pp. 126-129). Intention to be
legally bound. Neither real nor apparent intention that a promise be legally binding is
essential to the formation of a contract, but a manifestation of intention that a promise
shall not affect legal relations may prevent the formation of a contract.
Restatement §25 - When manifestation is not an offer. If from a promise, or
manifestation of intention, or from the circumstances existing at the time, the person to
whom the promise or manifestation is addressed knows or has reason to know that the
person making it does not intend it as an expression of his fixed purpose until he has
given a further expression of assent, he has not made an offer.
Restatement §43 - How an offer made by advertisement or general notice may be
revoked. An offer made by advertisement in a newspaper, or by a general notification, to
the public or to a number of persons whose identity is unknown to the offeror, is revoked
by an advertisement or general notice given publicity equal to that given to the offer
before a contract has been created by acceptance of the offer.
Restatement §50 – “A manifestation of assent to the terms thereof made by the offeree
in a manner invited or inquired by the offer.
Restatement §73 - Performance of Legal Duty - Performance of a legal duty owed to a
promisor which is neither doubtful nor the subject of honest dispute is not consideration;
but a similar performance is consideration if it differs from what was required by the duty
in a way which reflects more than a pretense of bargain. ok so english, I take out a loan
for 1000 at 10% per year. One year later, the 1100 is due, but we agree to go another year
at 5%, the fact that the interest rate changed does not matter, think adjustable rate
mortgages.
Restatement §74 - Settlement of Claims - (1) Forbearance to assert or the surrender of a
claim or defense which proves to be invalid is not consideration unless (a) the claim or
defense is in fact doubtful because of uncertainty as to the facts or the law, or (b) the
forbearing or surrendering party believes that the claim or defense may be fairly
determined to be valid. (2) The execution of a written instrument surrendering a claim or
defense by one who is under no duty to execute it is consideration if the execution of the
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written instrument is bargained for even though he is not asserting the claim or defense
and believes that no valid claim or defense exists.
Restatement §77 - Illusory and Alternative Promises - A promise or apparent promise
is not consideration if by its terms the promisor or purported promisor reserves a choice
of alternative performances unless (a) each of the alternative performances would have
been consideration if it alone had been bargained for; or (b) one of the alternative
performances would have been consideration and there is or appears to the parties to be a
substantial possibility that before the promisor exercises his choice events may eliminate
the alternatives which would not have been consideration.
Restatement §79 - Adequacy of Consideration, Mutual Obligation - If the requirement of
consideration is met, there is no additional requirement of (a) a gain, advantage, or
benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or (b)
equivalence in the values exchanged; or (c) “mutuality of obligation.”
Restatement §81 - Consideration as Motive or Inducing cause - (1) The fact that what
is bargained for does not of itself induce the making of a promise does not prevent it from
being consideration for the promise. (2) The fact that a promise does not of itself induce a
performance or return promise does not prevent the performance or return promise from
being consideration for the promise.
Restatement §84 - Promise to perform a duty despite non-occurrence of a condition. (1)
Except as stated in Subsection (2), a promise to perform all or part of a conditional duty
under an antecedent contract in spite of the non-occurrence of the condition is binding,
whether the promise is made before or after the time for the condition to occur, unless (a)
occurrence of the condition was a material part of the agreed exchange for the
performance of the duty and the promisee was under no duty that it occur; or (b)
uncertainty of the occurrence of the condition was an element of the risk assumed by the
promisor. (2) If such a promise is made before the time for the occurrence of the
condition has expired and the condition is within the control of the promisee or a
beneficiary, the promisor can make his duty again subject to the condition by notifying
the promisee or beneficiary of his intention to do so if (a) the notification is received
while there is still a reasonable time to cause the condition to occur under the antecedent
terms or an extension given by the promisor; and (b) reinstatement of the requirement of
the condition is not unjust because of a material change of position by the promisee or
beneficiary; and (c) the promise is not binding apart from the rule stated in Subsection
(1).
Restatement §125 - Contract to transfer, buy, or pay for an interest in land.(1) A promise
to transfer to any person any interest in land is within the Statute of Frauds. (2) A
promise to buy any interest in land is within the Statute of Frauds, irrespective of
the person to whom the transfer is to be made. (3) When a transfer of an interest in land
has been made, a promise to pay the price, if originally within the Statute of Frauds,
ceases to be within it unless the promised price is itself in whole or in part an interest in
land. (4) Statutes in most states exceptfrom the land contract and one-year provisions of
the Statute of Frauds short-term leases and contracts to lease, usually for a term not
longer than one year.
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Restatement §127 - Interest in land. An interest in land within the meaning of the Statute
is any right, privilege, power or immunity, or combination thereof, which is an interest in
land under the law of property and is not “goods” within the Uniform Commercial Code.
Restatement §130 - Contract not to be performed within a year. (1) Where any promise
in a contract cannot be fully performed within a year from the time the contract is made,
all promises in the contract are within the Statute of Frauds until one party to the contract
completes his performance. (2) When one party to a contract has completed his
performance, the one-year provision of the Statute does not prevent enforcement of the
promises of other parties.
Restatement §140 - Defenses of failure to perform. The Statute of Frauds does not
invalidate defenses based on the plaintiff's failure to perform a condition of his claim or
defenses based on his present or prospective breach of the contract he seeks to enforce.
Restatement §143 - Unenforceable contract as evidence - The Statute of Frauds does
not make an unenforceable contract inadmissible in evidence for any purpose other than
its enforcement in violation of the Statute.
Restatement §144 - Effect of unenforceable contracts as to third parties. Only a party
to a contract or a transferee or successor of a party to the contract can assert that the
contract is unenforceable under the Statute of Frauds.
Restatement §179 - Basis of Public Policies against enforcement. A public policy against
the enforcement of promises or other terms may be derived by the court from (a)
legislation relevant to such a policy, or (b) the need to protect some aspect of the public
welfare, as is the case for the judicial policies against, for example, (i) restraint of trade,
(ii) impairment of family relations, and (iii) interference with other protected interests.
Restatement §187 - Non-Ancillary restraints on Competition - A promise to refrain from
competition that imposes a restraint that is not ancillary to an otherwise valid transaction
or relationship is unreasonably in restraint of trade.
Restatement §205 - Duty of Good Faith and Fair Dealing - Every contract imposes upon
each party a duty of good faith and fair dealing in its performance and its enforcement.
Restatement §209 - Integrated Agreements - (1) An integrated agreement is a writing or
writings constituting a final expression of one or more terms of an agreement. (2)
Whether there is an integrated agreement is to be determined by the court as a question
preliminary to determination of a question of interpretation or to application of the parol
evidence rule. (3) Where the parties reduce an agreement to a writing which in view of its
completeness and specificity reasonably appears to be a complete agreement, it is taken
to be an integrated agreement unless it is established by other evidence that the writing
did not constitute a final expression.
Restatement § 210 - Completely and Partially integrated agreements - (1) A completely
integrated agreement is an integrated agreement adopted by the parties as a complete and
exclusive statement of the terms of the agreement. (2) A partially integrated agreement is
an integrated agreement other than a completely integrated agreement.(3) Whether an
agreement is completely or partially integrated is to be determined by the court as a
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question preliminary to determination of a question of interpretation or to application of
the parol evidence rule.
Restatement §211 - Standardized Agreements - (1) Except as stated in Subsection (3),
where a party to an agreement signs or otherwise manifests assent to a writing and has
reason to believe that like writings are regularly used to embody terms of agreements of
the same type, he adopts the writing as an integrated agreement with respect to the terms
included in the writing. (2) Such a writing is interpreted wherever reasonable as treating
alike all those similarly situated, without regard to their knowledge or understanding of
the standard terms of the writing. (3) Where the other party has reason to believe that the
party manifesting such assent would not do so if he knew that the writing contained a
particular term, the term is not part of the agreement.
Restatement §215 - Contradiction of Integrated Terms - Except as stated in the preceding
Section, where there is a binding agreement, either completely or partially integrated,
evidence of prior or contemporaneous agreements or negotiations is not admissible in
evidence to contradict a term of the writing.
Restatement §224 - Condition Defined. A condition is an event, not certain to occur,
which must occur, unless its non-occurrence is excused, before performance under a
contract comes due.
Restatement §227 - Standards of preference with regard to conditions. 1) In resolving
doubts as to whether an event is made a condition of an obligor's duty, and as to the
nature of such an event, an interpretation is preferred that will reduce the obligee's risk of
forfeiture, unless the event is within the obligee's control or the circumstances indicate
that he has assumed the risk. (2) Unless the contract is of a type under which only one
party generally undertakes duties, when it is doubtful whether; (a) a duty is imposed on
an obligee that an event occur, or (b) the event is made a condition of the obligor's duty,
or (c) the event is made a condition of the obligor's duty and a duty is imposed on the
obligee that the event occur, the first interpretation is preferred if the event is within the
obligee's control. (3) In case of doubt, an interpretation under which an event is a
condition of an obligor's duty is preferred over an interpretation under which the nonoccurrence of the event is a ground for discharge of that duty after it has become a duty
to perform.
Restatement §241 - Circumstances significant to determining if a breach is material. In
determining whether a failure to render or to offer performance is material, the following
circumstances are significant: (a) the extent to which the injured party will be deprived of
the benefit which he reasonably expected; (b) the extent to which the injured party can be
adequately compensated for the part of that benefit of which he will be deprived; (c) the
extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his
failure, taking account of all the circumstances including any reasonable assurances; (e)
the extent to which the behavior of the party failing to perform or to offer to perform
comports with standards of good faith and fair dealing.
Restatement §242 - Circumstances significant in determining when remaining duties are
discharged. In determining the time after which a party's uncured material failure to
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render or to offer performance discharges the other party's remaining duties to render
performance under the rules stated in 237, 241 and 238, the following circumstances are
significant: (a) those stated in § 241; (b) the extent to which it reasonably appears to the
injured party that delay may prevent or hinder him in making reasonable substitute
arrangements; (c) the extent to which the agreement provides for performance without
delay, but a material failure to perform or to offer to perform on a stated day does not of
itself discharge the other party's remaining duties unless the circumstances, including the
language of the agreement, indicate that performance or an offer to perform by that day is
important.
Restatement 261 - Discharge by Superinvening impracticability. Where, after a contract
is made, a party's performance is made impracticable without his fault by the occurrence
of an event the non-occurrence of which was a basic assumption on which the contract
was made, his duty to render that performance is discharged, unless the language or the
circumstances indicate the contrary.
Restatement 265 - Where, after a contract is made, a party's principal purpose is
substantially frustrated without his fault by the occurrence of an event the non-occurrence
of which was a basic assumption on which the contract was made, his remaining duties to
render performance are discharged, unless the language or circumstances indicate the
contrary.
Restatement §302 - Intended and Incidental Beneficiaries - (1) Unless otherwise agreed
between promisor and promisee, a beneficiary of a promise is an intended beneficiary if
recognition of a right to performance in the beneficiary is appropriate to effectuate the
intention of the parties and either (a) the performance of the promise will satisfy an
obligation of the promisee to pay money to the beneficiary; or (b) the circumstances
indicate that the promisee intends to give the beneficiary the benefit of the promised
performance. (2) An incidental beneficiary is a beneficiary who is not an intended
beneficiary.
Restatement §307 - Remedy of Specific Performance. Where specific performance is
otherwise an appropriate remedy, either the promisee or the beneficiary may maintain a
suit for specific enforcement of a duty owed to an intended beneficiary.
Restatement § 344 - Judicial remedies under the rules stated in this Restatement serve to
protect one or more of the following interests of a promisee: (a) his “expectation
interest,” which is his interest in having the benefit of his bargain by being put in as good
a position as he would have been in had the contract been performed, (b) his “reliance
interest,” which is his interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the contract not
been made, or (c) his “restitution interest,” which is his interest in having restored to him
any benefit that he has conferred on the other party.
II. Uniform Commercial Code, Article 2 (All UCC definitions are found at:
https://www.law.cornell.edu/ucc/2)
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1. UCC § 2-204 (1) – A contract for sale of goods may be made in any manner sufficient
to show agreement, including conduct by both parties which recognizes the existence of
such a contract.
UCC §2-205 - An offer by a merchant to buy or sell goods in a signed writing which by
its terms give assurance that it will be held open is not revocable, for lack of
consideration, during the time stated or if no time is stated for a reasonable time, but in
no event may such period of irrevocability exceed three months; but any such term of
assurance on a form supplied by the offeree must be separately signed by the offeror.
UCC §2-302 - Unconscionable contract or clause. (1) If the court as a matter of law finds
the contract or any clause of the contract to have been unconscionable at the time it was
made the court may refuse to enforce the contract, or it may enforce the remainder of the
contract without the unconscionable clause, or it may so limit the application of any
unconscionable clause as to avoid any unconscionable result.(2) When it is claimed or
appears to the court that the contract or any clause thereof may be unconscionable the
parties shall be afforded a reasonable opportunity to present evidence as to its
commercial setting, purpose and effect to aid the court in making the determination.
UCC §2-313 - Express warranties by the seller are created as follows: (a) Any
affirmation of fact or promise made by the seller to the buyer which relates to the
goods and becomes part of the basis of the bargain creates an express warranty that
the goods shall conform to the affirmation or promise. (b) Any description of the goods
which is made a part of the basis of the bargain creates an express warranty that the
goods shall conform to the description. (Pg. 6)
UCC §2-316 - Exclusion or modification of warranties - (1) Words or conduct relevant to
the creation of an express warranty and words or conduct tending to negate or limit
warranty shall be construed wherever reasonable as consistent with each other; but
subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202 )
negation or limitation is inoperative to the extent that such construction is unreasonable.
(2)Subject to subsection (3), to exclude or modify the implied warranty of
merchantability or any part of it the language must mention merchantability and in case
of a writing must be conspicuous, and to exclude or modify any implied warranty of
fitness the exclusion must be by a writing and conspicuous. Language to exclude all
implied warranties of fitness is sufficient if it states, for example, that "There are no
warranties which extend beyond the description on the face hereof."(3)Notwithstanding
subsection (2)(a) unless the circumstances indicate otherwise, all implied warranties are
excluded by expressions like "as is", "with all faults" or other language which in common
understanding calls the buyer's attention to the exclusion of warranties and makes plain
that there is no implied warranty; and (b) when the buyer before entering into
the contract has examined the goods or the sample or model as fully as he desired or has
refused to examine the goods there is no implied warranty with regard to defects which
an examination ought in the circumstances to have revealed to him; and (c) an implied
warranty can also be excluded or modified by course of dealing or course of performance
or usage of trade. (4) Remedies for breach of warranty can be limited in accordance with
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the provisions of this Article on liquidation or limitation of damages and on contractual
modification of remedy (Sections 2-718 and 2-719 ).
UCC 1-304 - Every contract or duty within the UCC imposes an obligation of good faith
in its performance and enforcement.
III. Key Terms and Terms of Art
1. Statutory Override - (pg4) An agreement, promise, contract, or warranty of cure
relating to medical care or treatment is void unless evidenced by a signed writing.
2. Express Warranty - (pg6) See UCC § 2-313 Mechanisms by sellers that include models
which are part of the basis of the bargain between the parties. Essentially, if the thing
being negotiated for is given certain attributes (speed of a boat or gas mileage for a car)
then the thing being bargained for becomes part of the contract.
3. Implied Warranty - (pg6) see UCC §2-314 (2)
4. Subjective theory of contracts – the largely outmoted theory of contracts which states
that a contract is an agreement in which the parties have a subjective meeting of the
minds.
5. Objective Theory of contracts – Contract formation depends on what is communicated,
not what is thought. Must be visible as a contract to a 3d person.
6. Occupy the field - Nothing can be added to the law because it is the authority.
6. Fungible - One item of a particular sort is typically understood to be as good as any
other. (pg. 105)
7. last-shot doctrine (1955) (Blacks Law Dictionary)The principle that in a battle of the
forms, the terms in the last contract form sent from one party to the other are the ones
that constitute the agreement. A party implicitly assented to and thereby accepted a
counteroffer by conduct indicating lack of objection to it.
8. Res Judica - (class notes) resolved by the court and cannot be re-litigated. It deals with
specific plaintiffs and specific issues. Once a court has decided a final judgment between
the parties, it cannot be re-litigated between those same parties.
9. Laches - (class notes) - you've waited to long to bring a claim to court, similar to
statute of limitations. Even though we haven't hit the Statute of limitations, the plaintiff
has already waited to long because it has damaged the defendant's ability to mount a
proper defense, even if the statute of limitations have not run.
10. Nominal Consideration - Consideration that is inconsequential. The plaintiff if correct
in their claim, but the damages are minimal. In tort law, it applies to trespassing without
damages.
11. Guarantor - "A fool with a pen." Essentially a cosigner.
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12. Assumpsit - An express or implied promise, not under seal, by which one person
undertakes to do some act or pay something to another. A common-law action for breach
of such a promise or for breach of a contract.
13. Surety - Someone who is primarily liable for paying another's debt or performing
another's obligation; specif., a person who becomes a joint obligor, the terms of the
undertaking being identical with the other obligor's, and the circumstances under which
the joint obligation is assumed being such that, if the joint obligor becomes required to
pay anything, he or she will be entitled to complete reimbursement.
14. Principal - Someone who authorizes another to act on their behalf as an agent.
15. Suretyship - The legal relation that arises when one party assumes liability for a debt,
default, or other failing of a second party. The liability of both parties begins
simultaneously. In other words, under a contract of suretyship, a surety becomes a party
to the principal obligation.
16. Guaranty - A promise to answer for the payment of some debt, or the performance of
some duty, in case of the failure of another who is liable in the first instance; a collateral
undertaking by one person to be answerable for the payment of some debt or
performance of some duty or contract for another person who stands first bound to pay or
perform.
17. Novation - The act of substituting for an old obligation for a new one that either
replaces an existing obligation with a new obligation or replaces an original party with a
new party.
18. Rule of Substantive Law - characterizing the parol evidence rule as substantive has 2
important consequences. (1) in our adversary trial system it is traditionally the
responsibility of the party seeking to preclude the admission of evidence to make timely
objection to its admission in order to give the trial judge an opportunity to rule before the
evidence is admitted. Failure to object is ordinarily a waiver of any ground of complaint
against the admission, and the evidence becomes part of the proof of the case. (2) In our
federal court system, inner the Erie doctrine, federal courts apply state substantive law to
any issue or claim which ahs its source in state law.
19. qui tam pro domingo rege quam pro se ipso in hac parte sequitur - Who pursues this
action on our lord the king's behalf as well as his own. Defined as Proceedings under the
False Claims Act brought by a private citizen acting in the public interest. Example of
this could a private contractor working in the public's interest after a hurricane and asking
for payment for work that was never performed.
20. Legal Paternalism - The theory that a government or legal system is justified in
controlling the individual and private affairs of its citizens. "Big Brother"
21. Inter Alia - "Among other things"
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22. In Pari Delicto - In full: in pari delicto potior est conditio defendantis. While it may
not always seem an honorable thing to do, a party to an illegal agreement is permitted to
set up the illegality as a defense even though the party may be alleging his or her own
turpitude. Rat yourself out to prove the contract is invalid (my words). They gone have to
stop before we start accidentally calling up demons.
23. Constructive Conditions - A condition contained in an essential contractual term that,
though omitted by the parties from their agreement, a court has supplied as being
reasonable in the circumstances; a condition imposed by law to do justice. The
cooperation of the parties to a contract, for example, is a constructive condition.
24. Liquidated Damages Clause - A reasonable amount agreed upon in the contract in
the event of a breach. must be a reflection of what the aggrieved parties actual damages
would be. (Question, why not include liquidated damages clauses in all contracts to deal
with the breach? It would seem to be an equitable remedy that would solve many breach
issues?)
25. Faithless Servants - Breach of some service contracts involving special confidence or
trust, such as the lawyer client relationship and agency generally, may give rise to
forfeiture of compensation otherwise owed.
26. Liquidated Damages Clause - A reasonable amount agreed upon in the contract in the
event of a breach. Must be a reflection of what the aggrieved parties actual damages
would be.
27. Restitution and Conditions - The failure of a condition does not mean that there is not
contract, it means that the contract is not enforceable. But, restitution can nevertheless be
used as a means of mitigating the effect of the non-occurrence of a condition.
Furthermore, after a contract is made, an obligor whose duty is conditional may promise
to perform despite the non-occurrence of a condition or despite a delay in its occurrence.
See Restatement §84.
28. Waiver - The intentional relinquishment of a know right. A party that has waived a
condition that is within the other party's control before the time for occurrence of the
condition can retract the waiver and reinstate the requirement that the condition occur
unless the other party has relied to such an extent that the retraction would be unjust.
29. Anti-waiver clause Redux -No action or inaction by that party shall amount to a
waiver of any condition of any duty of that party. These are not always honored by the
courts.
30. Aggrieved party - the party who has suffered the damages from the breach or the tort.
31. Stranded buyer/seller - For sellers who plead impracticability because their supplies
were choked off. The opposite is true for the buyer in the event that the purpose of the
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contract has been frustrated and the original cause for drafting the contract can no longer
be performed.
32. Intended Beneficiary/3d party beneficiary - a person not in privity to a contract, but
who is the intended beneficiary of a contract between others, may bring suit for the
enforcement of the contract to claim what is owed to them by the contracting parties.
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